New home sales down despite rate cut

Sales of new homes in Australia fell for a third straight month in September, an industry survey showed today, a sign that further cuts in interest rates might be needed to revive the long-suffering housing sector.

The Housing Industry Association (HIA) said its survey of large builders showed sales of new homes dropped 3.7 per cent in September, compared to August. Sales of detached homes fell 3.5 per cent, while sales of multi-units eased 4.2 per cent.

The decline comes despite interest rates cuts from the Reserve Bank of Australia (RBA) in both May and June. The central bank resumed its easing this month with a quarter point cut to 3.25 per cent, the lowest level in three years.

"Interest rate cuts should help foster a recovery in new home sales in the December 2012 quarter, along with new home incentives for first time buyers in three states and a nascent recovery gathering legs in Western Australia," said HIA chief economist, Harley Dale.

He called for another cut in rates when the RBA holds its November policy meeting next week. Markets are pricing in around a 60 per cent chance of an easing to 3 per cent in November, though the odds have lengthened since inflation figures for the third quarter proved higher than expected.